The Gunners have triggered the £22million release clause in the striker’s Leicester contract and are ready to hand him a four-year, £120,000-a-week contract.

West Ham also expressed an interest in the England international but co-owner Sullivan claimed the club do not have the funds to match Arsenal’s astronomical offer as they step up their own rebuilding plans.

“It was reported that one of those targets was Jamie Vardy, and while it is true that we would loved to have had him, the numbers being talked about in a potential move to Arsenal show that the market is going potty,” Sullivan told the official West Ham website.

“It is safe to say that signing him would have smashed our current wage structure and we are determined to buy players with good value in this mad market.”

West Ham have made it clear they are in the market for a new striker this summer, with the likes of Christian Benteke, Michy Batshuayi and Alexandre Lacazette all on their target list.

Vardy was unable to complete the transfer before England flew to France on Monday for their Euro 2016 campaign.

It is said the Leicester sensation has still not made up his mind on whether to leave Leicester but Arsenal have been told that they player remains keen to move to Emirates Stadium.

Manager Arsene Wenger has made his move after learning that Vardy has a release clause in the £70,000-a-week contract he signed in February.

Wenger is keen to strengthen an attack that will be deprived of Danny Welbeck for most of next season and with considerable doubts over whether Theo Walcott will be at the club beyond the summer.

Vardy has been targeted on the back of an incredible season in which he scored 24 Premier League goals to lead Leicester to an against-the-odds title.